Oil: What’s Happened and What’s Next?

In a year of notable financial developments, perhaps the most far-reaching and visible of this group is the sharp decline in oil prices in the second half of 2014.  Crude has dropped more than 50% since June and is now trading below $50 per barrel.  This precipitous decline stands in contrast to a prior four years of relative price stability when oil traded in a fairly narrow range between $93 and $118 per barrel.  What are the causes of the rapid change in sentiment around oil?  How have capital markets reacted?  What will be the impact of lower priced energy for economies both here and abroad?  And, how are our recommended equity and bond managers responding to the present challenges and potential opportunities presented by lower oil prices?  These and related questions are addressed below.